TEMIT outperforms under Mobius replacement Hardenberg

The Templeton Emerging Markets Investment Trust (TEMIT) has outperformed both its peers and its benchmark in the past year under lead manager Carlos Hardenberg, who assumed control of the £2.5bn portfolio from renowned manager Mark Mobius in late 2015.

Over one year TEMIT has returned 31 per cent compared to the 14 per cent return of the Global Emerging Markets Equities sector, FE data shows, while outperforming the MSCI Emerging Markets index by 11 percentage points.

In March this year it was announced that Mobius was being replaced as manager on a number of other funds following the appointment of Stephen Dover as the Templeton Emerging Markets Group CIO in April 2016. Mobius remains a portfolio manager on TEMIT.

Mel Jenner, investment companies analyst at Edison, says: “Carlos Hardenberg took over as lead manager on 1 October 2015, since when there has been a noticeable improvement in performance.

“TEMIT has outperformed its MSCI Emerging Markets index benchmark by around 11 percentage points over the last 12 months and has the best performance versus its peers by a considerable margin.

“Due to its substantial revenue reserves, the trust was able to maintain its FY17 annual dividend at 8.25p per share and a change in expense allocation will boost revenue returns from FY18; its current yield is 1.1 per cent.”

TEMIT aims to provide long-term capital growth by investing in emerging market equities across countries and sectors. Franklin Templeton’s global emerging markets team uses a five-step process that includes: screening stocks on valuations; fundamental analysis; a team peer review; portfolio allocation and portfolio evaluation and attribution analysis.

In January this year, TEMIT entered into a new £150m credit facility, having historically run a small cash balance. If the credit is fully drawn down, it would take gross gearing to around 6 per cent of net assets, compared with 2 per cent at the end of September 2017.

“The outlook for emerging market economic growth remains higher than for developed economies due to factors including the rising importance of the technology sector, increasing consumer demand, relatively low levels of debt and a better commodity price environment.

“The valuation of emerging market equities is also relatively attractive across a range of metrics. Investors looking to gain exposure to emerging markets may be attracted to a diversified fund that is actively managed and has a strong recent track record.”

The trust’s discount has narrowed slightly recently, down at 12.4 per cent from a 12-month average of 13.2 per cent. Annual dividends have sat at 8.25p for the past three years with the current dividend yield 1.1 per cent. Edison says a change in expense allocation will boost revenue income and the prospective dividend payment from the 2018 fiscal year.